Treasuries Close Modestly Higher After Seeing Early Weakness

(RTTNews) - After moving to the downside in early trading on Tuesday, treasuries moved modestly higher over the course of the session.

Bond prices climbed well off their early lows and into positive territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.4 basis points to 2.681 percent after reaching a high of 2.721 percent.

With the modest drop on the day, the ten-year yield extended a recent downward trend, closing lower for the fourth consecutive session.

Profit taking likely contributed to the initial weakness among treasuries following the recent strength, although selling pressure remained subdued.

The subsequent rebound by treasuries may have reflected lingering uncertainty about the economic outlook amid a lack of major data.

Treasuries also seemed to benefit from a positive reaction to the Treasury Department's auction of $30 billion worth of three-year notes, which attracted slightly above average demand.

The three-year note auction drew a high yield of 0.895 percent and a bid-to-cover ratio of 3.36, while the ten previous three-year note auctions had an average bid-to-cover ratio of 3.28.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

Peter Boockvar, chief market analyst at the Lindsey Group, said, "The 3-year note auction, typically a bore, is now more of a focus because of the potential Federal Reserve exit strategy that lies ahead."

"Today's auction however told us nothing new about sentiment as it was about in line with expectations as the yield was dead on with the when issued and the bid to cover of 3.36 was only slightly above the 12 month average," he added.

While Wednesday represents another relatively light day in terms of economic news, the minutes of the latest Federal Reserve meeting may shed some light on the outlook for monetary policy.

Bond traders are also likely to keep an eye on the results of the Treasury Department's auction of $21 billion worth of ten-year notes.